GE profit falls 46% but meets view

Dow component lifts bottom end of 2006 forecast

By

PadraicCassidy

NEW YORK (MarketWatch) -- General Electric Co. posted an expected 46% decline in fourth-quarter profit Friday, but its sales growth lagged Wall Street's forecasts as industrial and financial-services revenue failed to hit the mark.

The industrial conglomerate also lifted the bottom end of its 2006 earnings outlook, which was generally in line with analyst forecasts.

GE
GE, +0.47%
said fourth-quarter net income fell to $3.06 billion, or 29 cents a share, compared with $5.63 billion, or 53 cents a share, in the year-earlier period. The results included a $2.9 billion loss at GE Insurance Solutions and $200 million in earnings from Genworth Financial
GNW, +0.00%
classified as discontinued operations as GE seeks an exit from the insurance business.

After adjustments, the Fairfield, Conn.-based conglomerate's profit came to $5.77 billion, or 55 cents a share, matching the average estimate of analysts surveyed by Thomson First Call.

GE said revenue in the three months to Dec. 31 rose 3% to $40.71 billion from $39.68 billion. That was below the First Call forecast for $42.1 billion in revenue.

GE lifted the minimum figure in its 2006 earnings outlook, based partly on strong growth in Asia and developing markets. GE now expects to earn $1.94 to $2.02 a share rather than a previous $1.92 to $2.02 a share.

"We see continued strong growth in Asia and developing markets, mid single-digit growth in the Americas, and slow growth in Europe," said CEO Jeff Immelt.

Analysts polled by First Call forecast earnings, on average, of $1.98 a share in 2006.

GE said its industrial sales, the largest source of revenue, grew 4% to $25.6 billion, while financial-services revenue was flat at about $15.1 billion, reflecting lower asset sales.

The industrial sales surprised many analysts, who were expecting 9% growth. Analysts pointed to weaker-than-expected results in health care, energy and consumer finance, as well as a lower tax rate.

"The energy businesses missed their sales targets, while industrial margins were a little light," according to J.P. Morgan's research note. The transportation segment was in line with expectations, the analysts said, while NBC Universal bested targets modestly and commercial-financial services posted a relatively big miss.

GE said its businesses generated $21.6 billion in cash in 2005, supporting its plan to buy back $7 billion to $9 billion of its shares in 2006. Net income for 2005 fell to $16.35 billion from $16.82 billion. The per-share figure for 2005 adjusted profit was $1.72, also matching First Call's estimates.

Fourth-quarter revenue at NBC Universal fell 3% to $4.19 billion from $4.34 billion, with profit at the entertainment segment falling 7% to $801 million from $860 million.

Immelt predicted the Winter Olympic Games in February in Torino, Italy, would generate $650 million to $750 million in sales and breakeven results for the NBC networks.

GE also forecast quarterly results for 2006 that were in line with analysts' predictions. The one exception was the first three months of 2006, when GE said it would earn about $3.9 billion to $4.1 billion, or 38 cents to 40 cents a share. The First Call consensus estimate is for 38 cents a share.

"We view the economy more or less the same as 2005," Immelt told analysts in a conference call. Hear Immelt's comments.

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